The Secure Act 2.0 was signed into law December 29th, 2022, bringing more major changes to tax law. Among the most notable changes include a significant step towards ‘Rothification’ through expanded use, new requirements, and even a way to move money from college savings accounts to a Roth IRA. Here are the top five Roth-related retirement changes following the passing of Secure Act 2.0. 5 new changes to Roth accounts in Secure Act 2.0 1. 529 plan to Roth IRA rollovers To help alleviate parents’ fears about over-funding 529 college savings accounts, the Act enables penalty-free rollovers from ..read more

Should you make after-tax Roth or pre-tax contributions to your 401(k)? Roth accounts can be powerful wealth-building tools. But paying tax early doesn’t always make sense, especially for taxpayers with significant income. Here’s when to consider pre-tax vs Roth 401(k) contributions. Quick recap on pre-tax vs Roth 401(k)s Both pre-tax and Roth accounts grow tax-deferred, but aside from that, there are several differences. Traditional (pre-tax) 401(k) Reduces your ordinary taxable income for the year When the money is taken out, it’s taxed as regular income Subject to required minimum distribu ..read more

If you have company stock in your 401(k), you may want to consider whether to take advantage of net unrealized appreciation at retirement. Under the net unrealized appreciation rules, employees can roll over the portion of their 401(k) invested in company stock to a brokerage account and pay tax at more favorable long-term capital gains tax rates (rather than ordinary income) when the shares are sold. It doesn’t always make sense to use NUA – or keep employer stock in your retirement plan – so carefully weigh the pros and cons. Net unrealized appreciation rules If you currently have company st ..read more

If passed, the ‘Secure Act 2.0’ would significantly alter the retirement landscape. Officially called the Securing a Strong Retirement Act of 2021, the bill is essentially a follow up to the 2019 Secure Act. After passing the House Ways and Means Committee yesterday, the proposed legislation is now going to the House. If voted into law, here are four ways the Secure Act 2.0 could affect you. 1. Increase the required minimum distribution age The Secure Act 2.0 would, for the second time since 2019, increase the RMD age. In the original Secure Act, retirees could begin delaying RMDs from age 70 ..read more

Investors can save over three times as much in a 401(k) compared to an IRA, without even including employer contributions. So, it’s little surprise that most Americans rely on employer plans to save for retirement. Given the reliance on 401(k) or 403(b) savings, investors may wonder: should I pay someone to manage my 401(k)? As with nearly everything in personal finance, the answer is: it depends. Here are some situations when having a financial advisor manage your 401(k) may make sense and when to consider managing the account yourself. Should I manage my own retirement account? There ar ..read more

As part of the Secure Act, most adults who inherit a 401(k) from a parent must take the money in 10 years. Depending on your financial position and life stage, this could complicate your tax situation. After inheriting a 401(k) from a parent, consider ways to balance the benefits of extending tax-deferred investment growth with the tax impact of distributions. A central factor in determining the best distribution strategy is your current tax bracket and expectations going forward. You have 10 years to take the money from an inherited 401(k) After inheriting a 401(k) from a parent, your primary ..read more

If you’ve inherited a 401(k) from a parent, you likely have questions about your options for the account and the tax impact. Luckily, non-spouse beneficiaries usually have some control over how to manage an inherited 401(k) plan. However, as part of the Secure Act, most adults who inherit a 401(k) from a parent must take the money in 10 years. Depending on your financial position and life stage, the short payout period could really complicate your tax situation. After inheriting a 401(k) from a parent, you may be looking to balance prolonged investment growth with tax mitigation on distributio ..read more

Which is better, a Roth or traditional 401(k)? The central difference between a Roth 401(k) and traditional 401(k) is the tax treatment of your contributions. Investors make traditional 401(k) contributions before tax while Roth savings occur after tax. Which is best for you will depend on your current/future tax situation, asset mix, and cash flows. For individuals in the upper end of the tax brackets, paying tax now on retirement savings may not make sense. Think long-term when deciding whether a Roth 401(k) will be better than a traditional 401(k). If Roth accounts are only a small fraction ..read more

Nearly every retirement plan offers target-date funds as investment options. But are target-date funds a good choice? The age-based method of setting your asset allocation makes sense in some cases, but investors can also stay in a target-date fund too long. Put another way, if your financial situation has evolved over time, shouldn’t your investment strategy? Here’s how to decide if target-date funds are a good choice for your retirement account. What is a target-date fund? A target-date fund is a diversified investment mix based on your age and the year you expect to retire. When you’re youn ..read more

What are your 401(k) rollover options? You may consider rolling over an old 401(k) to a Roth IRA, which is properly described as a Roth conversion. Converting your old 401(k) or 403(b) to a Roth IRA is worth considering. A Roth IRA offers unique benefits unavailable in other types of retirement accounts: no RMDs, tax-deferred growth and tax-free withdrawals. But a 401(k) to Roth IRA conversion doesn’t make sense in every situation. For high-earners, it may not make sense to pay tax on your retirement savings now. 401(k) Conversion to a Roth IRA Anyone can convert a 401(k) to a Roth IRA once a ..read more